PORT TOWNSEND — Discovery of an accounting error will lead to the city of Port Townsend to receive an estimated $200,000 less in anticipated tax revenues this year, City Manager David Timmons said.

According a memo that was released by Timmons on Friday from Deputy Finance Director Corena Stern to Finance Director Michael Legarsky, ConocoPhillips and Phillips 66 have been miscoding their remittance as belonging to the city of Port Townsend, when in fact these sales-deliveries to Port Townsend Paper Corp. were taking place outside of the city limit.

“This changes the financial picture of the city dramatically,” Timmons said.

“We only have three months to make up the difference, and to give you the magnitude of the impact — if we were to suspend payroll from the general fund for the rest of the year, it still wouldn’t cover the loss.

“I just found out about this [Thursday],” Timmons said.

“They didn’t even call us to say it was going on.”

When the state Department of Revenue discovered the error, it made an immediate adjustment in the financial statement.

Legarsky’s office noticed the $77,000 adjustment in the January-June figures when the statements were received this week.

At the Jefferson County Treasurer’s Office, Janet Holbrook noticed a corresponding increase in county revenues but did not know its origin until she was contacted by the city.

The city contacted the Department of Revenue to ask about the lower numbers and was told about the miscoding.

Department spokesperson Mike Gorylow said the agency generally notifies a municipality if tax figures change drastically but apparently failed to do so in this instance.

Gorylow said that it was fairly common for businesses to be unclear about which government entity gets sales tax revenues and the amounts often need adjustment.

“The numbers are always moving around,” he said.

“Sometimes the goods are delivered in unincorporated areas to a company with a mailing address inside the city limits, and this causes confusion.”

This is the case with the mill which is located just outside the city limit but which has a mailing address with a Port Townsend zip code.

In her memo, Stern said it appeared that the vendors have been miscoding their remittance since before 2003 but that she was told the readjustment of taxes goes back only to January 2012.

Gorylow said his statements were general and that he could not comment on individual cases.

He said that the city of Port Townsend “probably should not have released” specific information about the miscoding.

The news comes during a time when Jefferson County and the city of Port Townsend officials are discussing the allocation of recreation monies to support Memorial Field and the Mountain View Pool.

The city, which agreed to contribute money gained from the voter-approved Proposition 1 in November 2010 has approached the county to restructure the agreement.

Economic conditions have made the agreement “no longer sustainable,” according to several city representatives.

Last week, representatives of the city and the county met twice: on Sept. 25 to discuss options for funding the pool and on Sept. 27 to study the creation of a Metropolitan Parks District.

Both County Administrator Philip Morley and Timmons characterized these meetings as first steps, and Morley said that he expected an agreement to be reached.

These meetings occurred prior to the news of the reallocated funds.

Timmons called the situation “ironic, because they are taking the money away from the city and giving it to the county” and said that he hoped that some of the funds would be used to fund recreation.

Morley said he has not examined the situation, stating that the funds did not represent found money.

“Our sales tax revenues are down from what we projected, so this additional revenue will be used to plug some of the holes,” he said,

“We are struggling with our budget issues We are still in the lean years.”

Morley said that he “did not want to negotiate this in the newspaper.

“Having said that, we are continuing to talk to the city about their financial situation and how it can be solved.”